How Can You Benefit from Investing in Dividend Stocks?

  • February 22, 2021 11:12 AM GMT
  • Team Kalkine
How Can You Benefit from Investing in Dividend Stocks?

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Summary

  • Investors look forward to investing in dividend stocks for distributions made by the company, along with capital appreciation.
  • Defensive stocks that distribute their earnings can help investors in beating the market volatility and help in sustaining the economic downturns.
  • Dividend stocks provide investors with passive income without redeeming their investments.

Earnings distributed to shareholders in the form of cash or bonus shares is referred to as dividends. Notably, not all companies pay dividends and neither they are obligated to do so. Investors looking for passive income streams opt for dividend stocks and make money by being invested in these stocks for the long term by means of capital appreciation.

In the longer term, there are multiple benefits of investing in dividend paying stocks. These investments can grow exponentially while rewarding you with dividend payments. Also, investing in companies that distribute their earnings can help you weather the unprecedented downturns and sustain through volatile markets. Usually, the implied meaning of investing in dividend paying stocks is that the companies have a profit generating business model with good prospects for long-term and substantial amounts of cash.

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In this article, we shall put our lens through some companies with stable dividend streams.

  1. Reckitt Benckiser Group Plc (LON: RB.)

UK’s leading manufacturer and marketer of health and hygiene products, Reckitt Benckiser, is on track to deliver double digit like-for-like net revenue growth for the year 2020. The company has managed to carry the momentum in the third quarter from the first half of 2020. Notably, the company announced an interim dividend of 73 pence per share during the first half of 2020.

The company’s leading disinfectant brands, Dettol, Lysol, Sagrotan and Napisan, did exceptionally well, leading to an increase in Hygiene and Health volumes. The company has managed to protect its supply chain despite the pandemic led lockdowns.

During the third quarter of 2020, the company’s net revenue grew by 13.3 per cent on a like-for-like (LFL) basis, driven by an increase in price/mix and strong volume growth. The company’s revenue numbers leveraged upon the surge in eCommerce sales, which were up over 45 per cent during the third quarter and over 50 per cent YTD.

The company seems to be uniquely placed to help tackle the challenges the world is currently facing as it owns a world-class portfolio of hygiene, health, and nutrition brands to make the world a cleaner and healthier place. The company has an annual dividend yield of 2.78 per cent. Shares of RB traded at GBX 6,002.00 on 22 February 2021 at GMT 10:39 AM +1.

Also read: Top 3 FTSE All-Share stocks with over 10% dividend yield

  1. Persimmon Plc (LON: PSN)

UK-based housebuilder Persimmon produced a robust performance for the year 2020 by facilitating consistent delivery of new homes despite the unprecedented challenges presented by the pandemic during the year. During the second half of 2020, the Group witnessed resilient customer demand. The company managed to deliver 8,675 new home legal completions during the period.

The price of new homes sold to owner occupiers on an average was up by 3.7 per cent year-on-year to over £250,000 in 2020, according to a recent trading environment. The company’s forward sales were up 25 per cent year-on-year to £1.689 billion in 2020. During the year 2020, the company declared an annual dividend of 110 pence per share. The company has an annual dividend yield of 3.97 per cent. Shares of PSN traded at GBX 2,713.00 on 22 February 2021 at GMT 10:41 AM +1.

  1. BP Plc (LON: BP.) 

The FTSE 100-listed oil & gas major, BP delivered a strong operating performance, with four new upstream major projects starting production and the development of 3.3GW net renewable generating capacity during 2020. The company has reported a profit of $1.4 billion in Q4 FY20 as compared with the previous quarter loss, with $2.3 billion gain on disposal from the sale of BP's petrochemicals business.

BP also announced a dividend of 5.25 cents per share during the fourth quarter of 2020. The company has an annual dividend yield of 6.86 per cent. Shares of BP group closed at GBX 271.00 on 22 February 2021 at GMT 10:43 AM +1.

 

 


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